Novartis vs. Teva: Which Pharmaceutical Stock Is a Better Buy in 2026?

Choosing between Novartis AG (NYSE:NVS) and Teva Pharmaceutical Industries (NYSE:TEVA) requires weighing the stability of an established innovator against the potential of a generic specialist undergoing a significant turnaround.

Novartis is a powerhouse in the drug development world, prioritizing high-margin innovative treatments for complex diseases. In contrast, Teva is a leader in the generic market and is currently pivoting toward biosimilars and specific innovative drugs to rebuild its profitability and reduce its heavy debt load.

The case for Novartis AG

Novartis is an innovative medicines company focused on researching and marketing prescription treatments for complex diseases. The business prioritizes key therapeutic areas such as oncology, neuroscience, and cardiovascular health across 118 countries. With a workforce of approximately 77,000 employees, it targets global health needs through high-value medicine development.

As one of the prominent pharmaceutical stocks, Novartis saw revenue reach nearly $56.7 billion in FY 2025. This represented a revenue growth rate of nearly 10% compared to the previous year. The company reported net income of nearly $14 billion.

As of its December 2025 balance sheet, the debt-to-equity ratio is approximately 0.8x. This ratio compares total debt to shareholder equity, helping investors understand how much a company relies on borrowed money. The company generated free cash flow of nearly $17.7 billion, the cash remaining after paying for operating costs and capital expenditures. The current ratio is about 1.1x, indicating the ability to cover short-term obligations with assets such as cash and inventory.

The case for Teva Pharmaceutical

Teva Pharmaceutical Industries is a global leader in both generic and innovative medicines, operating across 57 different markets. The company maintains a concentrated customer base, relying on a small group of large wholesalers and retail chains for a significant portion of its sales. Customer concentration like this adds a layer of risk to the business, as these buyers possess substantial bargaining power.

In FY 2025, revenue reached nearly $17.3 billion, reflecting a revenue growth rate of approximately 4.9%. After several years of reporting net losses, the company achieved a net income of $1.4 billion for the year.

Based on its December 2025 balance sheet, the debt-to-equity ratio is roughly 2.2x. This indicates a higher level of debt relative to shareholders’ equity than many industry peers. The current ratio is about 2x. Free cash flow for the year was approximately $1.2 billion, providing the company with some liquidity to fund its ongoing operations and debt obligations.

Risk profile comparison

Novartis AG faces the constant challenge of patent expirations, which allow cheaper versions of its drugs to enter the market. The company must also navigate the inherent uncertainty of clinical trials, in which failing to demonstrate a drug's safety or efficacy can lead to significant financial losses. Additionally, competition from other large innovators like Roche Holding creates pressure to maintain a high pace of research and development.

Teva faces material pricing pressures from the U.S. Inflation Reduction Act, which could impact the pricing of its key innovative assets. The company also remains involved in ongoing legal and compliance matters, including antitrust actions and financial obligations arising from past opioid litigation. Furthermore, executing its strategy to divest its active pharmaceutical ingredient business while competing with rivals such as Viatris (NASDAQ:VTRS) creates significant operational complexity.

Valuation comparison

Teva Pharmaceutical Industries appears more attractive for value seekers due to its lower P/S ratio, while the higher Forward P/E of Novartis AG reflects its superior profitability.

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Which stock would I buy in 2026?

Teva reported first-quarter 2026 results that bested expectations, with revenue of almost $4 billion and net income of $369 million. Teva has some very well-selling generics, including Ajovy, a treatment for migraines; Uzedy, a schizophrenia treatment; and Austedo, which treats Huntington’s disease. As a group, they grew more than 40% in local currencies in the first quarter of 2026. Still, Wall Street sees Teva’s sales declining to $16.6 billion in 2026, while net income is projected to grow to $1.54 billion. Teva has a strong drug pipeline — it has had its own generic GLP-1 approved, similar to Novo’s Saxenda, and soon that will be joined by olanzapine, which treats schizophrenia. Those and other drugs are expected to get Teva back to top-line growth for 2027.

Novartis saw its first-quarter volume rise 14% to $13.5 billion with net income of almost $3.2 billion. Generics are clipping growth a little, but Novartis has a strong development pipeline, led by remibrutinib, a treatment for certain autoimmune disorders that could launch in late 2026 or early 2027. Remibrutinib is expected to be a blockbuster, with lifetime sales of perhaps $4 billion.

Each business is on the right track, but Teva is more attractive for long-term investors given its better price-to-sales and forward P/E ratios.

Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.